Many insurers are reviewing the applicable legal requirements with respect to electronic signatures and records and have inquired with state insurance departments about their current practices. On March 26, 2020, the New York State Department of Financial Services (DFS) published guidance for electronic signatures, transactions and filings with DFS (DFS Guidance), which is summarized below and available here: https://www.dfs.ny.gov/industry_guidance/electronic_signatures_transactions_filings.

Background

The federal Electronic Signatures in Global and National Commerce Act (E-Sign) (15 U.S.C. 7001 et seq.) establishes the validity of electronic records and signatures for transactions in or affecting interstate or foreign commerce. E-Sign generally provides that (1) a signature, contract or other record relating to such a transaction may not be denied legal effect, validity or enforceability solely because it is in electronic form; and (2) a contract relating to such a transaction may not be denied legal effect, validity or enforceability solely because an electronic signature or electronic record was used in its formation.

A state statute, regulation or other rule of law may modify, limit or supersede E-Sign only if the state (a) adopts the uniform version of the model Uniform Electronic Transactions Act (UETA) or (b) specifies alternative procedures or requirements for the use or acceptance of electronic records or electronic signatures that are consistent with E-Sign and do not require, or accord greater legal status or effect to, specific technology or technical specifications (relating, for example, to creating, storing or authenticating electronic records or electronic signatures).

E-Sign preserves the rights of individuals to not use electronic signatures and requires consent to use an electronic format. Both E-Sign and the UETA require that a party have the ability to withdraw consent at any time. Certain disclosures may be provided solely via electronic delivery provided that the consumer has affirmatively consented and certain other requirements are met.

To date, 47 states and Washington, D.C. have adopted a version of the UETA. New York, Illinois and Washington state have not adopted the UETA.

The UETA does not apply to, among other things,¹ transactions that a state excludes from the UETA’s coverage. Exclusions from the UETA of insurance coverages vary from state to state: one state’s version of the UETA may contain significant exclusions for life insurance, while another state may exclude notice of cancellation or termination of health insurance benefits or life insurance benefits.

DFS Guidance Regarding Electronic Signatures, Transactions and Filings 

In New York, E-Sign and New York’s Electronic Signatures and Records Act (ESRA) (New York State Technology Law Article 3) permit the use and acceptance of electronic signatures and records if the consumer with whom an individual or entity is doing business consents to engage in an electronic transaction. The DFS Guidance indicates that “[p]articularly at this time, in instances that cause no consumer harm, the [DFS] encourages the insurance industry to use and accept electronic signatures and records to facilitate insurance transactions and minimize disruptions.” DFS makes clear, however, that the DFS Guidance “does not negate prior approval requirements for policy forms and other communications in the [New York] Insurance Law or regulations promulgated thereunder.”

The DFS Guidance indicates that DFS “does not require that the insurance industry obtain consent from a consumer in a particular way” and that “[a] consumer may consent to engaging in electronic transactions by sending an email to the regulated insurance person or entity affirmatively stating such, for example.” 

The DFS Guidance also provides that if “the submission of hard copies or originals to the [DFS] is required by the [New York] Insurance Law or regulations promulgated thereunder, during the current state of emergency, the [DFS] is accommodating its regulated insurance persons and entities by allowing such filings and submissions to be made electronically, with the originals to follow. The [DFS] will consider electronic submissions made by an applicable deadline to be timely even if the hard copies or originals follow after such deadline.”

The DFS Guidance also indicates that “[t]here are certain provisions that contain additional requirements that may need to be considered, such as provisions that require the use of a ‘seal’ with a writing or the use of United States mail or provisions that require notices to be sent to the address shown in the insurance policy or contract.” DFS notes in this context New York State Governor Cuomo’s Executive Order No. 202.7, which authorizes virtual notarization procedures for documents that are required to be notarized through April 28, 2020.

Finally, the DFS Guidance reiterates that an individual who legally represents a consumer with a power of attorney complying with New York General Obligations Law § 5-1501B may sign on behalf of a consumer, but “an insurance agent, bail agent, title agent, and independent adjuster may not because they legally represent the insurer, nor may a public adjuster do so.”

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¹Examples of other transactions that are not covered by the UETA are (1) wills, codicils or testamentary trusts; and (2) transactions covered by the UCC, other than sections 1-107 (rights after a breach) and 1-206 (statute of frauds), and Articles 2 and 2A (sales).

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